Melvin Brees
Farm Management Specialist
University of Missouri Extension




Decisive Marketing

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June 30, 2000

July 4th Pivot?

The July 4th weekend is an important focus point for corn and soybean markets. Weather conditions and forecasts, at this time of year, are considered critical to production. Corn is beginning pollination and soybeans are making rapid vegetative growth while starting to set blooms. Good growing conditions and forecasts for good weather following the fourth generally suggest the crops will be "made." However, lack of rain in the forecasts and predictions for higher temperatures would again raise production concerns. Corn still needs moisture to fill and August is a critical month for soybean production. This is a typical situation and tends to make the July 4th weekend the "pivot point" for the markets. The trend (up or down) into harvest, is often set following this weekend.

Significant rainfall in June has reduced most of the drought worries in the markets. Prices have reacted sharply downward, erasing the "weather premiums" that had pushed prices up during the dry spring. Thursday's closing new crop futures prices (Dec. corn $2.13, Nov. Soybeans $4.84) are nearly the same as the 1999 new crop futures contracts were last October during harvest! Will prices "pivot" up or down from here?

Prices could go lower. Last year (1999) on July 9, November soybeans set a contract low of $4.05. On July 13, December corn bottomed at $1.94. These prices suggest that, if weather after the fourth looks good, corn and bean prices could decline even more.

What might turn prices higher? Demand appears strong. Friday's (6-30-00) USDA Grain Stocks and Acreage reports should provide some additional clues (this is being written on Thursday prior to the reports). Strong demand and hints of less than ideal weather could turn prices around. Some weather forecasters continue to predict the formation of a high-pressure ridge that might again "shut off" the rain. This situation could quickly pivot prices upward similar to what occurred last year.

What marketing strategies are left for this situation? Time is running out for remaining old crop still held in storage. Any near term rallies may provide the "last chance" to minimize losses. The odds of profits from high "drought prices" have been washed away with recent rains. Current Central Missouri new crop cash bids are about equal to USDA's most recent projection of average prices for the 2000 crop and are at levels that would trigger LDPs. The LDP provides downside protection, at this point, for unpriced grain that must be delivered at harvest if prices continue to decline. Any summer rally might also offer a last chance to at least price in the upper end of USDA's projected price range.

The July 4th pivot point is here. Weather forecasts in the coming week will have a large impact on price direction into harvest. Watch what happens and be prepared to take advantage of any "last chance rallies!"--Melvin

University of Missouri ExtensionDecisive Marketing - June 30, 2000 -- Revised: April 20, 2004